Paid Search Drives $6 In Local Sales For Every $1 In Online Sales

The State Of Paid Search

I spotted this fantastic and eye-opening article over on Search Engine Land. It was written by Greg Stirling

Annual US retail spending is roughly $4 trillion according to the US Commerce Department. And while e-commerce is growing very rapidly, it remains less than 5 percent of total retail sales. Historically, most search marketers have focused almost exclusively on e-commerce sales. But a new study finds that the real impact of paid search is offline.

Paid Search Has Six-to-One Impact in Offline Stores

Based on two years of research conducted by retail marketing firm RevTrax, the study discovered that “for every $1 of e-commerce revenue generated from paid search, marketers can expect to see approximately another $6 of in-store revenue.”

In other words, paid search has 6:1 impact on offline sales over e-commerce. Because of the challenges of tracking consumer behavior online to offline, most of this has been invisible to marketers. Only now with the rise of smartphones and other methodologies is online-to-offline tracking becoming more widely available.

Between August 2009 and August 2011 RevTrax monitored millions of paid-search ads and consequent sales for its retail clients. To track in-store sales accurately RevTrax used landing pages with coupons and unique IDs:

A paid search ad was displayed to a consumer

The paid search ad led the consumer to a printable or mobile landing page displaying a coupon with a unique barcode

The consumer redeemed the coupon inside a brick & mortar store

Each coupon was tracked back to the online search (and the keyword)

Average Paid Click Worth $15 in Store

Using this methodology, RevTrax could conclusively determine in-store sales affected by paid search ads. Here’s how RevTrax’s findings illuminated the “value of a click” (where the average transaction size was under $200):

The average click on a paid search ad generated approximately $15 of in-store revenue, with some merchants seeing as much as $28 of in-store revenue.

Approximately 9% of clicks on a paid search ad generated an in-store sale, with some merchants seeing up to 26% of clicks on a paid search ad generating an in-store sale.

Again, what the company found was that paid search drove $6 in offline sales for every $1 in sales online. RevTrax thus argues that multichannel merchants who do not include in-store sales into the ROI calculation are potentially “undervaluing the paid search channel by as much as 85 percent.”

This is the first study to conclusively show the offline impact of paid search at this kind of scale, based on actual behavior rather than consumer surveys and self-reported data. The findings are pretty radical, with broad implications for search marketers and the industry as a whole.

Postscript: Here’s a bit more color and explanation from Seth Sarelson, COO of RevTrax, in response to a couple of questions I received about the study:

Clients are measuring these paid search campaigns at the keyword level and looking at brand keywords, competitive keywords, categories/products, etc. and the study uses a mix all these different types of executions to come to these results. I’m not sure that it’s clear to the person commenting that we’re talking about paid search only, not organic, so there’s certainly no guarantee that a brand is at the top of the paid search results for any keywords in a particular category.

One of the things that the study also mentioned is that many clients are reporting that 40-50% of customers acquired via paid search were new. This is big as it shows that this isn’t just an example of existing customers searching on branded terms looking for a deal.

It would certainly make sense for us to do a follow up that compares brand vs non-brand to address this specifically, as it’s an important point of distinction. I’m going to push for this internally.

As for PC vs Mobile, we’re working on a later study that will address these results, but most of what we’re looking at here is printable coupons from a PC.